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SEGMENTS INFORMATION | 9 Months Ended
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Sep. 30, 2020
Segment Reporting [Abstract] |
SEGMENT INFORMATION | SEGMENT INFORMATION The Company determines its business segments and reports segment information in accordance with how the Company’s chief operating decision maker (“CODM”) organizes the segments to evaluate performance, allocate resources and make business decisions. Segment results are based on the segment’s revenues and operating profit, where segment operating profit is defined as income from operations before unallocated costs. Expenses included in segment operating profit consist principally of direct selling and delivery costs as well as an allocation of certain shared services expenses. Certain corporate expenses are not allocated to specific segments as these expenses are not controllable at the segment level. Such expenses include certain types of professional fees, non-corporate taxes, compensation to non-employee directors and certain other general and administrative expenses, including compensation of specific groups of non-production employees. In addition, the Company does not allocate amortization of intangible assets acquired through business combinations, goodwill and other asset impairment charges, stock-based compensation expenses, acquisition-related costs and certain other one-time charges. These unallocated amounts are combined with total segment operating profit to arrive at consolidated income from operations as reported below in the reconciliation of segment operating profit to consolidated income before provision for income taxes. Additionally, management has determined that it is not practical to allocate identifiable assets by segment since such assets are used interchangeably among the segments. The Company manages its business primarily based on the managerial responsibility for its client base and market. As managerial responsibility for a particular customer relationship generally correlates with the customer’s geographic location, there is a high degree of similarity between customer locations and the geographic boundaries of the Company’s reportable segments. In some cases, managerial responsibility for a particular customer is assigned to a management team in another region and is usually based on the strength of the relationship between customer executives and particular members of EPAM’s senior management team. In such cases, the customer’s activity would be reported through the management team’s reportable segment. During the fourth quarter of 2019, the Company changed its management reporting of segment revenue to exclude other income. Prior year amounts presented below have been changed to conform to the new presentation. Revenues from external customers and operating profit/(loss), before unallocated expenses, by reportable segment for the three and nine months ended September 30, 2020 and 2019, were as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Segment revenues: |  |  |  |  |  |  |
North America | $ | 391,605 |  |  | $ | 358,987 |  |  | $ | 1,167,536 |  |  | $ | 1,000,701 |
Europe | 231,418 |  |  | 204,952 |  |  | 695,056 |  |  | 596,378 |
Russia | 29,220 |  |  | 24,164 |  |  | 73,393 |  |  | 63,944 |
Total segment revenues | $ | 652,243 |  |  | $ | 588,103 |  |  | $ | 1,935,985 |  |  | $ | 1,661,023 |
Segment operating profit/(loss): |  |  |  |  |  |  |
North America | $ | 87,272 |  |  | $ | 79,310 |  |  | $ | 248,951 |  |  | $ | 213,114 |
Europe | 43,018 |  |  | 27,550 |  |  | 109,223 |  |  | 87,014 |
Russia | 2,958 |  |  | 5,524 |  |  | (2,168) |  |  | 11,765 |
Total segment operating profit | $ | 133,248 |  |  | $ | 112,384 |  |  | $ | 356,006 |  |  | $ | 311,893 |
Intersegment transactions were excluded from the above on the basis that they are neither included in the measure of a segment’s profit and loss results, nor considered by the CODM during the review of segment results. There were no customers that accounted for more than 10% of total segment revenues during the three and nine months ended September 30, 2020 and 2019. Reconciliation of segment operating profit to consolidated income before provision for income taxes is presented below:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Total segment operating profit: | $ | 133,248 |  |  | $ | 112,384 |  |  | $ | 356,006 |  |  | $ | 311,893 |
Unallocated amounts: |  |  |  |  |  |  |
Stock-based compensation expense | (23,474) |  |  | (15,471) |  |  | (54,794) |  |  | (53,024) |
Amortization of intangibles assets | (3,086) |  |  | (2,554) |  |  | (9,215) |  |  | (7,293) |
Other acquisition-related expenses | (243) |  |  | (1,144) |  |  | (859) |  |  | (2,505) |
Other unallocated expenses | (10,049) |  |  | (12,650) |  |  | (23,807) |  |  | (30,966) |
Income from operations | 96,396 |  |  | 80,565 |  |  | 267,331 |  |  | 218,105 |
Interest and other income, net | 1,672 |  |  | 2,509 |  |  | 5,875 |  |  | 6,775 |
Foreign exchange gain/(loss) | 5,896 |  |  | (3,105) |  |  | 3,253 |  |  | (10,151) |
Income before provision for income taxes | $ | 103,964 |  |  | $ | 79,969 |  |  | $ | 276,459 |  |  | $ | 214,729 |
Geographic Area Information Long-lived assets include property and equipment, net of accumulated depreciation and amortization, and management has determined that it is not practical to allocate these assets by segment since such assets are used interchangeably among the segments. Physical locations and values of the Company’s long-lived assets are presented below:
| As of September 30, 2020 |  | As of December 31, 2019
Belarus | $ | 72,507 |  |  | $ | 75,984 |
Ukraine | 30,142 |  |  | 24,652 |
United States | 16,329 |  |  | 15,637 |
Russia | 13,686 |  |  | 17,980 |
India | 6,349 |  |  | 7,443 |
Poland | 5,032 |  |  | 5,029 |
Hungary | 4,820 |  |  | 5,201 |
Spain | 2,685 |  |  | 1,106 |
China | 2,556 |  |  | 3,036 |
Mexico | 2,431 |  |  | 2,353 |
Other | 7,152 |  |  | 6,838 |
Total | $ | 163,689 |  |  | $ | 165,259 |
The table below presents information about the Company’s revenues by customer location for the three and nine months ended September 30, 2020 and 2019:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
United States | $ | 371,366 |  |  | $ | 340,803 |  |  | $ | 1,106,459 |  |  | $ | 959,471 |
United Kingdom | 77,519 |  |  | 74,992 |  |  | 251,928 |  |  | 209,773 |
Switzerland | 50,399 |  |  | 38,781 |  |  | 144,158 |  |  | 110,378 |
Netherlands | 28,827 |  |  | 22,161 |  |  | 81,973 |  |  | 63,816 |
Russia | 27,963 |  |  | 23,668 |  |  | 69,372 |  |  | 62,020 |
Germany | 22,172 |  |  | 20,940 |  |  | 62,163 |  |  | 59,716 |
Canada | 18,219 |  |  | 17,582 |  |  | 52,724 |  |  | 50,339 |
Other locations | 55,778 |  |  | 49,176 |  |  | 167,208 |  |  | 145,510 |
Total | $ | 652,243 |  |  | $ | 588,103 |  |  | $ | 1,935,985 |  |  | $ | 1,661,023 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8924-108599 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8981-108599 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8721-108599 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9031-108599 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9038-108599 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 22 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8736-108599 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9054-108599 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8657-108599 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8721-108599 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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